How to build saving habit

SHARE

ARTICLE

All thanks to lifestyle and inflation, every Indian today is running on a tight budget, whether they are earning a yearly income of Rs 1 lakh or Rs 1 crore. For a typical Indian, a third of their salary goes to taxes, another third will form expenses and the remaining third will be savings (if they are prudent enough). Savings is a habit that you must cultivate. You must strive to increase your savings whenever there is an opportunity. Here’s help on how to go about it.

Make it automatic

The best way to ensure that you make savings a habit is to make it automatic. How? Set up auto debit for all your savings. You can use a sweep-in account for this purpose. You can even set up SIP in mutual funds. When it is automatic, you have no choice but to save. You also will not forget to save. Over the course of time, this will become a routine and your savings would have also increased.

Most of the times you might miss your payments if it is not made automatic. Schedule your payments by giving standing instructions to your bank. You can also schedule payments using your net banking account. This way you will pay all your dues on time and will be able to save on those late fees.

Keep increasing savings

Every year an individual receives salary hikes and bonuses. The biggest mistake that most of us might make is using this money for enhancing our lifestyle. Ideally, you should increase your savings along with your salary hikes. This is the easiest way to increase your savings over time. What can you do? Whenever you get a hike, try to increase the amount you put in mutual funds, recurring deposits and other such investments.

You can increase your SIPs every year. Let’s take an example. Suppose you are investing Rs 10,000 every month in a Mutual Fund SIP and expect a return of 12% per year. If you continue to invest the same amount for 10 years, you will get Rs 23.23 lakhs. Let’s assume you decide to increase the SIP amount by 10% every year. This way, you will be investing Rs 17.4 lakh instead of Rs 12 lakhs and the value of your investment at the end of 10 years will be Rs 31.45 lakh. So, consider increasing your savings every year.

Don’t account for the discounts

It is a typical practice to draw up a budget when you make big purchases such as buying household appliances or electronics. With hypermarkets today offering huge discounts, you will be able to purchase those items at a budget far lower than estimated. The amount you save because of the discount can be put into your savings account or invested in the right avenues. This way, you buy a product at lower costs and also save money after the purchase.

Do away with expensive loans

One of the reasons why you might not be able to save might be your EMIs. It might be true that you have loans with high interest rates. With interest rates at low levels, consider talking to your bank to bring down the interest rates or balance transfer to a lender who is offering lower rates. A floating interest rate loan will help you get lower rates automatically when rates fall.

These simple hacks will help you build a savings habit over time. When you start saving money, consider investing so that you earn more.